What is Demand Curve?
In economics, Demand curve is a graphical presentation of the demand schedule. It is obtained by plotting a demand schedule.
The demand schedule can be converted into a demand curve by graphically plotting the different combinations of price and quantity demanded of a product.
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Individual demand curve
Individual demand curve: It is the curve that shows different quantities of a commodity which an individual is willing to purchase at all possible prices in a given time period with an assumption that other factors are constant.
Refer to Table 1 below, the individual demand schedules of A and B, when plotted on a graph, will represent the individual demand curves, which are shown in Figures:
An individual demand curve slopes downwards to the right, indicating an inverse relationship between the price and quantity demanded of a commodity.
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Market demand curve
Market demand curve: This curve is the graphical representation of the market demand schedule. A market demand curve shows different quantities of a commodity which all consumers in a market are willing to purchase at different price levels at a given time period, while other factors remaining constant.
A market demand curve can be plotted by consolidating individual demand curves. Therefore, market demand curve is the horizontal summation of individual demand curves.
Therefore, market demand curve is the horizontal summation of individual demand curves. In the example given in Table 1 below, plotting the price of eggs (column 1) against the summation of quantities demanded by A and B (column 4) would represent a market demand curve. This is shown in Figure below:
A market demand curve, just like the individual demand curves, slopes downwards to the right, indicating an inverse relationship between the price and quantity demanded of a commodity.
The negative slope of a demand curve is a reflection of the law of demand
However, it is important to understand the reasons why the demand curve slopes downward to the right.
|80||2||4||2 + 4 = 6|
|70||4||6||4 + 6 = 10|
|60||6||10||6 + 10 = 16|
|50||9||15||9 + 15 = 24|
|40||14||22||14 + 22 = 36|
Also Read: What is Supply Curve?
Why the demand curve slopes downward?
Generally, the demand curves slope downwards. It signifies that consumers buy more at lower prices. We shall now try to understand why the demand curve slopes downward?
Different explanations have been given different economists for the operation of the law of demand. These are explained below: